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How the Income Tax Treatment of Saving and Social Security Benefits May Affect Boomers' Retirement Incomes

by Barbara A. Butrica, Karen E. Smith, and Eric Toder

WP#2008-3

Abstract

Income tax provisions affect the buildup of retirement assets during workers’ careers and after-tax income following retirement.  This paper uses the Urban Institute’s DYNASIM model to simulate how potential changes in the tax treatment of retirement saving, Social Security benefits, and income from assets outside of retirement accounts may affect boomers’ retirement incomes.  Results show that changes in the income thresholds for taxing Social Security benefits have the largest impact on middle-income boomers, while changes in contribution limits for retirement saving plans and tax rates on capital gains and dividends have the largest impact on the highest income boomers.

For executive summary in PDF

For full paper in PDF

Dr. Barbara A. Butrica is a senior research associate at the Urban Institute.  Karen E. Smith is also a senior research associate at the Urban Institute.  Eric Toder performs and supervises research on tax policy and retirement policy at the Urban Institute and Urban-Brookings Tax Policy Center.
Tags: Savings and Consumption, Social Security, Working Papers,
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